Comcast Dials Up Loud Results
Phone Business Drives Surges In Revenue, Cash
By Mike Farrell -- Multichannel News, 4/29/2007 8:00:00 PM
Comcast reported a strong first quarter last Thursday, tallying a 12% bump in revenue to $7 billion and a 14% increase in cash flow to $2.8 billion. The surges were driven by the addition of 571,000 telephone customers.
The results may well pick up in the next few quarters. On a conference call with Wall Street analysts, chief operating officer Steve Burke pointed out that Comcast’s Boston system — one of its earliest phone markets — now has customers for its digital voice service in 12% of homes passed, compared to 7% for the rest of the markets it serves.
“We think Boston is a leader and a telling indicator of where the entire business could be in the next nine or so months,” Burke said.
Analysts were paying particularly close attention to how many digital voice customers Comcast would add. Estimates had ranged from 550,000 to 600,000 new additions for the period and the Philadelphia-based cable operator fell smack in the middle of that range.
| Comcastic First Quarter | ||
|---|---|---|
| Comcast reported record growth in digital, high-speed Internet and telephony subscriber additions last week. | ||
| 1Q 07 | 1Q 06 | |
| Cable Revenue | $7 billion | $6.2 billion |
| Cable Cash Flow | $2.8 billion | $2.4 billion |
| Basic Subscriber Additions | 75,000 | 50,000 |
| Digital Subscriber Additions | 644,000 | 355,000 |
| High-Speed Internet Additions | 563,000 | 512,000 |
| Telephony Subscriber Additions | 571,000 | 232,000 |
| Source: Comcast |
||
Comcast also showed strong performance in other subscriber metrics — it added 75,000 basic subscribers, 563,000 high-speed Internet customers (its best quarter ever); and 644,000 digital cable subscribers (its best quarterly rise in history). In total, Comcast added 1.8 million basic, high-speed Internet, phone and digital cable-subscribers in the period, its best ever.
About half of the high-speed Internet customer additions were former customers of telephone companies’ digital subscriber line services, Burke noted. That indicates subscribers will pay more for a superior product, a fact noted in a research report issued by Oppenheimer & Co. cable analyst Tom Eagan. Comcast’s cable-modem service is priced at about $43 per month for current cable TV customers, while telcos’ DSL offerings can be priced as low as $14.99 per month.
Burke said that Comcast’s efforts to roll out digital boxes ahead of the Federal Communications Commission’s July 1 ban on set-tops with integrated security functions was one of the drivers of the increased digital additions.
“As a result, you’re seeing in the first quarter, us being more aggressive than we normally would be to get more boxes out before July 1,” Burke said. “In the second quarter, you’re going to see that spike even more. We’re going to have a very, very high digital number in the second quarter, which we think actually is going to drop in the third quarter after we’ve made the transition to the new boxes.”
Of the digital additions, about 307,000 were for enhanced digital, Comcast’s low-end digital tier, Burke said.
Burke also said Comcast is continuing its conversion of all customers in downtown Chicago to digital service. However, he said, there is no push to convert the rest of Comcast’s systems to full digital immediately.
Burke said that the Chicago conversion is going “easier than we thought,” mainly because the operator has done it before in parts of its Augusta, Ga., market.
“Our general approach to the eventual conversion, which we think is inevitable, to all-digital is that there is no great rush and there’s no need to put too much stress, financially or otherwise, on the system,” Burke said, meaning the company would gradually convert to full digital service.
“We don’t need the bandwidth just yet,” Burke said. “Our strategy of chipping away at it makes sense.”
Burke added that the integration of the former Adelphia Communications and Time Warner Cable systems it acquired as part of its joint purchase of Adelphia with Time Warner Inc. in July is about 80% completed.
In addition, the former Adelphia and Time Warner markets reported basic-subscriber gains in the period and Comcast was able to boost cash-flow margins at those properties from the mid-30% range to over 40%, in line with Comcast’s historic systems.
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